Glossary of Economic Terms

absolute advantage

A country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another country.

academic consultants

An advisory group initiated by the Board in the 1960’s to provide a forum for the exchange of views between the Federal Reserve Board and members of the academic community in economics and banking.

accretion of discount

A straight-line accumulation of capital gains on discount bonds in anticipation of being paid par at maturity.

accrual method of accounting

See cash method of accounting.

aggregate

Any total (e.g., the gross national product; the sum of monthly sales).

agreement corporation

Corporation chartered by a state to engage in international banking; so named because the corporation enters into an ‘agreement’ with the Board of Governors to limit its activities to those permitted an Edge Act corporation.

amortization

The process of fully paying off indebtedness by installments of principal and earned interest over a definite time.

annual percentage rate – APR

The cost of credit on a yearly basis expressed as a percentage.

appraisal fee

The charge for estimating the value of property offered as security.

appreciation

See currency appreciation.

auction

A method of determining price and interest.

automated clearinghouse – ACH

Electronic clearing and settlement system for exchanging electronic transactions among participating depository institutions; such electronic transactions are substitutes for paper checks and are typically used to make recurring payments such as payroll or loan payments. The Federal Reserve Banks operate an automated clearinghouse, as do some private-sector firms.

automated teller machines – ATM

Computer-controlled terminals located on the premises of financial institutions or elsewhere, through which customers may make deposits, withdrawals, or other transactions as they would through a bank teller. Other terms sometimes used to describe such terminals are customer-bank communications terminal (CBC) and remote service unit (RSU). Groups of banks sometimes share ATM networks located throughout a region of the country that may include portions of several states.

automatic transfer service account – ATS

A depositor’s savings account from which funds may be transferred automatically to the same depositor’s checking account to cover a check written or to maintain a minimum balance.